Pressure will build to find tax revenue

Tuesday

Oct 30, 2012 at 2:00 AM

Predicting the flow of money into Albany is hazardous in any economic climate. Anticipate too much revenue and budgets have to be adjusted late in the year, usually after contracts and supplies have already taken what turns out to be more than they should have. Anticipate too little and people complain that they paid taxes that were not needed in the end.

Predicting the flow of money into Albany is hazardous in any economic climate. Anticipate too much revenue and budgets have to be adjusted late in the year, usually after contracts and supplies have already taken what turns out to be more than they should have. Anticipate too little and people complain that they paid taxes that were not needed in the end.

Predicting the flow in the volatile environment of the past few years has been even more troubling, and the latest news from the man in charge of these prognostications — or at least the man who gets the blame when they turn out to be off target — demonstrates just how hard it can be to get this right.

Thomas DiNapoli, the state comptroller, reported late last week that the state came up $213 million short of its estimate for tax revenue in the first half of the fiscal year. Even with so many signs of a recovery filling the news, the state took in a bit less than it did in the previous year.

The problem was not in the collection of sales taxes. There was a bit of an improvement there, verifying reports that people are starting to spend a bit more, if only to replace the things they have put off replacing. Even that good news was not that great, because the state had expected to see even more of an increase.

The troubling indicator for this year and the future is the decline in income-tax collections, a reflection of decreased wages, often attributed to decreased hours, even as the unemployment rate is stable or declining in many parts of the country.

At this rate, to keep the budget balanced the state would have to see an increase in all tax revenue of more than 6 percent, a figure that no one is banking on. And no matter what happens in the elections or in the post-election debates over the looming federal tax and spending changes, there is likely to be no extra help available for states.

So if the state cannot rely on the federal government and will have to find ways to trim expenditures to meet the constitutional requirement of a balanced budget, even allowing for the creative accounting that governors and comptrollers employ to swear that they have met that goal, that means local governments should not be counting on any more help to balance their own books.

This will have serious repercussions on villages, cities, towns, counties and school districts, all of which have been feeling the pinch of the state's 2-percent tax increase cap and regularly complaining that they cannot go through any more rounds of budgets cuts while continuing to deliver the services they consider basic.

All of this will increase pressure on legislators and voters to approve proposals that promise to increase revenue, especially the constitutional amendment allowing casino gambling and the permits for hydraulic fracturing to extract natural gas. That makes it even more important for the state to get a handle on the real costs of these proposals, instead of looking only at the projected benefits.